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842 E x O F F I C I O MBMB*#UI W, P . 6 . H A R D I N G , GOVERNOR A L B E R T S T R A U S S . VICE GOVERNOR DAVID F . H O U S T O N SECRETARY OF T ^ E TREASURY C H A R L E S S . HAMLIN CHAIRMAN FEDERAL RESERVE BOARD J O H N SKELTON WILLIAMS COMPTROLLER OF THE * ADOLPH C. MILLER CURRENCY HENRY A. MOEHLENPAH W . T . C H A P M A N . SECRETARY R . G . E M E R S O N . ASSISTANT SECRETARY ADDRESS REPLY TO WASHINGTON FEDERAL RESERVE BOARD W . M . 1 M L A Y , FISCAL A6ENT September <27,1920. X-2GL2 CONFIDENTIAL Dear S i r : The Federal Reserve Bank of New York r e c e n t l y sent t o t h e Federal Reserve Board f o r i t s i n f o r a a t i o n a "Summary of Proposed Changes i n Cash and Custody F u n c t i o n s . " The q u e s t i o n of p r o v i d i n g a l l p o s s i b l e s a f e - g u a r d s f o r t h e p r o t e c t i o n of cash and s e c u r i t i e s i s always of paramount importance, and a n y t h i n g which t e n d s t o improvement i n t h i s f i e l d cannot f a i l t o be of i n t e r e s t t o t h e Federal Reserve Banks, a s i t i s t o t h e Federal Reserve Board. I t occurs t o t h i s o f f i c e t h a t you might be i n t e r e s t e d i n t h e p l a n adopted by t h e Federal Reserve Bank of New York and, w i t h t h a t Bank's p e r m i s s i o n , a copy of t h e p l a n i s forwarded h e r e w i t h . The Board i s not prepared to say t h a t t h i s p l a n i s a d a p t a b l e t o the o t h e r Federal Reserve Banks, but wishes merely t o a c q u a i n t a l l t h e Banks w i t h t h e l a t e s t developments i n bank management. Very t r u l y y o u r s . Enclosure. Governor. To Chairmen of a l l F.R, Banks. 843 X-2012 S M A Y OF PROPOSED CHANGES IN CASH AND CUSTODY FUNCTION. U MR I t i s recommended t h a t t h e Cash and Custody Function be reorganized a s follows, and t h a t the v a u l t r e g u l a t i o n s be amended t o conform t o such reorganization: CONTROLLER Cfeush and Custody Function M N GR AAE Cash Dept. Organization. M N GR AAE Custody Dept. CHIEF Cksh Custody Division 1 OFFICERS Cash Trunks Boxes & Bags Other Recptacles CHIJSF Vault Division TELLERS Cash Currency Coin Bullion CHIEF Security Custody Division Discount Collateral Safekeeping Investments F i s c a l Agency Bonds and Securities The p o l i c y of considering the cash of t h e bank a s under t h e personal supervision and custody of the o f f i c e r s i s a h e r i t a g e of the days when banking was conducted on such a small scale t h a t the c a s h i e r could be personally charged with the r e s p o n s i b i l i t y of supervising a l l cash. Since then, however, the f u n c t i o n s of banking have become so enlarged and r a m i f i e d t h a t i t has been necessary t o segregate the v a r i o u s f u n c t i o n s performed and p l a c e each i n charge of a s t a f f s p e c i a l i s t , r e s p o n s i b l e only f o r the work f a l l i n g w i t h i n h i s function. a 844 -2- X-2012 a The r e c e n t r e o r g a n i z a t i o n of the Federal Reserve Bank took cognizance of t h i s i n a l l r e s p e c t s save i n the custody of the cach of the bank. In t h i s p a r t i c u l a r i n s t a n c e the old p r a c t i c e i s s t i l l i n vogue, the o f f i c e r s "being j o i n t l y responsible f o r the c o n t r o l and custody of c a s h . This method n o t only d e c e n t r a l i z e s the r e s p o n s i b i l i t y f o r c o n t r o l l i n g the cash, b u t proves i n p r a c t i c e t o be exceedingly cumbersome and expensive. Hot only are s e v e r a l o f f i c e r s compelled to spend the g r e a t e r p a r t of the day i n the v a u l t s s e t t i n g combinations, b u t departments a r e f o r c e d t o waste a considerable amount cf time w a i t i n g fc:- m o f f i c e r to reach the vault* These delays have a d i r e c t e f f e c t upon the service rendered t o member banks i n t h a t , In many i n s t a n c e s , bank messengers have been h e l d on the l i n e bf our Paying D i v i s i o n f o r an u n n e c e s s a r i l y long t i m e . No s i m i l a r d i f f i c u l t i e s are experienced i n handling s e c u r i t i e s , because the custody of a l l s e c u r i t i e s has been c e n t r a l i z e d i n the Custody Department. The s e c u r i t i e s handled t o t a l $3,400,000,000, i n n e g o t i a b l e f o r a , as compared with $300,000,000* i n cash, and i n s p i t e of the f a c t t h a t t h e r e i s i n f i n i t e l y more work attached t o t h e handling of s e c u r i t i e s than t o the handling of c a s h , i t has been p o s s i b l e through the c e n t r a l i z a t i o n of the c o n t r o l of s e c u r i t i e s i n the Custody Department to handle s e c u r i t i e s w i t h the maximum of p r o t e c t i o n combined with an economy and e f f i c i e n c y of operation t h a t i s lacking i n the p r e s e n t d e c e n t r a l i z e d method of c o n t r o l l i n g cash. Our experience with s e c u r i t i e s i n d i c a t e s t h a t the l o g i c a l method of cont r o l l i n g aid h a n d l i n g cash would be through the organization of a Cash Custody Division s i m i l a r t o the p r e s e n t s e c u r i t i e s Custody Department* The advantages of the r e o r g a n i z a t i o n as charted above are b r i e f l y as follows: A. CONTROL 1. ( a ) (b) The S e c u r i t i e s Custody Division w i l l have custody of s e c u r i t i e s deposited i n the v a u l t f o r safekeeping. (This i s the same as a t p r e s e n t . ) The Cash Custody Division w i l l have custody of a l l o f f i c e r s ' cash deposited i n the v a u l t and of a l l t r u n k s , t r u c k s or o t h e r r e c e p t a c l e s , deposited by t e l l e r s and departments i n the v a u l t f o r safekeeping over n i g h t * 845 -3- X-2012 a 2. 3* B. The o r g a n i z a t i o n of a Cash Custody Division w i l l d e f i n i t e l y p l a c e t h e custody of o f f i c e r s * cash and trunks i n a d i v i sion of t h e bank t h a t w i l l be shown on t h e o r g a n i z a t i o n c h a r t a s above. The c e n t r a l i z a t i o n of control and r e s p o n s i b i l i t y thus secured g r e a t l y i n c r e a s e s t h e p r o t e c t i o n a f f o r d e d the d i r e c t o r s and o f f i c e r s of the bank i n the handling of these v a l u a b l e s , The two Custody Divisions w i l l operate a s a s a f e deposit company i n conjunction with members of Group 1, making i t p o s s i b l e t o reduce the number of employees, approximating t h r e e hundred, now a u t h o r i z e d by t h e v a u l t r e g u l a t i o n s t o have a c c e s s t o t h e v a u l t , t o approximately twenty employees o t h e r than o f f i c i a l s of the bank* (See sumnary of Changes i n E x i s t i n g Vault Regulations a t t a c h e d . ) OPERATION 1. Transactions of the Cash Custody Division w i l l be witnessed by r e p r e s e n t a t i v e s of t h r e e d i s t i n c t groups* (a) One or more members of Group 1 (b) One or more members of t h e Cash Custody Division (c) One or more r e p r e s e n t a t i v e s of the Auditing Department 2. All t r a n s a c t i o n s of t h e Cash Custody Division w i l l be based upon properly a u t h o r i z e d deposit or withdrawal t i c k e t s . 3« The Cash Custody Division w i l l d e b i t and c r e d i t other d e p a r t ments f o r t r a n s a c t i o n s with i t , and i t s d a i l y proof w i l l form an i n t e g r a l p a r t of the cash proof of the bank. U. All e n t r i e s i n the records of the O f f i c e r s ' Cash Section of t h e Cash Custody Division w i l l be a u d i t e d d a i l y . 5. The process of d e p o s i t i n g and withdrawing cash from t h e v a u l t w i l l be g r e a t l y s i m p l i f i e d . Departments w i l l no longer be forced t o wait i n t h e v a u l t u n t i l an o f f i c e r can be secured t o s e t the combination, and o f f i c e r s w i l l not be required t o spend so much time i n the v a u l t , t h u s e f f e c t i n g an i n crease i n o p e r a t i n g e f f i c i e n c y with a decrease i n c o s t . 846 X-2CQ.2 a S M A Y OF CHANGES TN EXISTING VAULT HEGTH.ATIONS U MR • UNDER PROPOSED REORGANIZATION OF CASH AND CUSTODY FUNCTION. OUTSIDE D O O R S . TO ALL L _ VAULTS — Membership Proposed Present General O f f i c e r s and Senior O f f i c e r s , and Mr. Fowler ) (Chiefs and Mr. Goodwin ) (asst.chiefs Mr. Sprowl ) (of Vault Div Mr. Meeks ) General O f f i c e r s and Senior O f f i c e r s , , and Mr. Fowler Mr, Goodwin Mr. Sprowl Mr. Meeks Group 1 Upper dial, entrance doors t o vaults i ! All Mr. Mr. Mr. Group 2 Lower d i a l entrance doors t o vaults managers Hammond Fuman Jenkins Note: On main v a u l t i n the following are a l s o Mr. L o t t s Mr, Mr. Hollingshead Mr. I N T E R I O R Upper d i a l interior compartments: t h i s building authorized: Harvey Chapin COMPARTMENTS 0 :F Present Membership Group 1 Mr. H. C. Low, Jr. Mr. Rees Mr. Vansant General O f f i c e r s and Senior O f f i c e r s , and Mr. Fowler Mr, Goodwin Mr. Sprowl Mr. Meeks Note: Only c o n t r o l s compartments cont a i n i n g o f f i c e r s * cash and l a r g e r e s e r v e . In case of l a t t e r , combination i s held only by general and s e n i o r officers. All managers Chief - Paying Division Chief - Receiving Division Chief - Money D i v i s i o n Chief - S e c u r i t i e s Custody Dv. 1st Asst. Chief-Securities Custody D i v i s i o n Chief - Cash D i v i s i o n 1st Asst.Chief-Cash Custody Division ALL VA UL T S Proposed General O f f i c e r s and Senior O f f i c e r s , and Mr. Fowler ) (Chief and Asst. Mr. Goodwin) ( c h i e f s of Vault Mr. Sprowl ) (Division Mr. Meeks Note: Hold upper d i a l combinat i o n s of a l l i n t e r i o r compartments which include a l l cash and c u s t o d i e s of t h e bank. 847 -2- X-2012 a INTERIOR COMPARTMENTS OF VAULTS (Cont'd) Membership Custody Groups Lower Dial interior compart- Custody Groups Lower d i a l interior compartments Special Group s Present 1 . O f f i c e r s 1 Cksh G. E, Chapin R. M. O'Hara C. H. Cod J . E. Raasch J . E. Crane J . M. Rice Ralph T. Crane L. R. Rounds B. 11. Grant I . ¥ . Waters W. A. Hamilton E. C. French H. M. J e f f e r s o n R. 17. Furman J . W. Jones J . F. Hammond A. J . Lins H. C, Jenkins 17. B. Matteson H. C. Low, J r . H. R. Murray H. K. Rees S. S. Vansant 2 . Custody Department Group A Group B H, C. Jenkins L. Ten Eyck W. A. Watson C. E. P r i c e W. E. Townsend P. DeFliese George Lown M, J . Heaphy F. Tellander C. F. Bahntge 3. B i l l Department Grout) A Group B Earl V. Guy M. J . McLoughlin T7. A. Keepers t7. S. Leonard J . P. Dunn D. Gardner 4. Cfeish Department ( A u t h o r i t i e s Div.) Single combination compartment. 5- Cksh Department (Gold Bullion Sec.) Group A Group B John White F. M. C u r t i s P. J . Donohue > 17. C. S a l t e r " J ; Proposed 1. Cfeish Custody Division O f f i c e r s ' Cfeish and T e l l e r s ' Cfeish Manager, Custody Department Manager, C&sh Department or i n t h e i r absence any one of f o u r names t o be s e l e c t e d from t h e Cfeish Custody Division. S e c u r i t i e s Custody Div. Manager, Cash Department Manager, Custody Dept. and i n t h e i r absence ally one of s i x names t o be s e l e c t e d from S e c u r i t i e s Custody Div. Eliminated Will be deposited with Cash Custody D i v i s i o n Eliminated Will be deposited with Cash Custody D i v i s i o n . Eliminated Will be deposited with Gash Custody Division. 848 -> X-2012 a INTERIOR COMPARTHEKTS OF VAULTS ( C o n t ' d . ) Present Membership 6 . Cash Detit* (incoming Reg. t M l Sec-) Group A Group B F.B. Anderson R. MsKinley F. Seeger J . J . Potter F*N. Delevan C . J . Witmore J .A. Cole 7 . Cash D e r t . (Money Div. -Mixed Currency) Group A Group B ^ A.L. G r i f f i n A.C, Walton A.C. Dunckleman C. Hickok R.E. Gatechair W.G. S e y f o r t h 8. Cash Dept. (Money Div. - N t s . o t h e r F.R.B.) Group A Gr oup B James F l e t c h e r C. Simonson Albert T u t t l e H. Woolryr Special Groups lower dial interior compartments 9 . Cash Department (Money Div.-Trunk Sec.) Group A Ghrovp B J . J . Byrnes R«W. Combes F . Montignsni C.M. C h r i s t i e A.C. Dunckelman C . I . Budd B . P . Moffat J . Dundas W.A. Anderson J . 0'Sullivan E.H. Osterhaus I . I . Parker A.C. Walton R. Major A.L. G r i f f i n B.P. Boas R.C. Chapin F. Gugal R.E. Gatechair J . J . Logue 10. Cash Dept. (Money Div.Uhasst. F.R» Notes) Group A Group B R.C. Chapin J . J . Logue 1 Richard Major F . S . Stubbs M.H. Rudyard H. Kinne 11. Cash Department (Paying Div.) Group A (jroup B_ C.C. B e l l G.H. L o t t s H. Hollingshead T.B. Bruder W. Marcus A. Black C.A. Senior Proposed Eliminated Will be deposited with Cash Custody D i v i s i o n . Eliminated Will be deposited with Cash Custody D i v i s i o n . Eliminated Will be deposited with Cash Custody Division* Eliminated Will be deposited w i t h Cash Custody D i v i s i o n Eliminated Will be deposited with Cash Custody Division Eliminated W i l l be deposited with Cash Custody Division X-2012 a -4- 849 IMTBRIOR COMPARTMENTS OF VAULTS ( C o n t ' d . ) / > Membership Special Groups Lower d i a l interior compartments Present 12. Cash Department (Receiving D i v . ) Grow B Grow A J . A . Anderson V.A. Harvey J . G . North P . P . Malcolm A.G. Anderson F. Stocker 11. C e r t , of Indebt. Dent. ( I s s u e ) Group B Group A H.L. Carpenter U. Wells G a r r e t t LaPort T.B. DeLa Ree H.A. Davis G. Stephenson 1U. C e r t , of Indebt* Dent. (Redenrp) Group A Group B U. Wells G.M.D. KLov F.J* Kammerer B.H. Manee G- Stephenson E. Voorhees 15• Cash Dent.(Money Div. 1 ' s & 2 ' s Sec.) Group A Group B J . F . Dundas I . L . Parker W.A. Anderson B.P. Moffat E.H. Osterhaus F . Montignani J. 0Sullivan R.A. Falh l 6 . Cash Dent. (Money Div.Cancel & Cut. Sec.) Grou-p A Group B L. Carrazone R. Combes A. MacNeil T. F o r s t e r M.H. Rudyard 17. Check Dent. (Redenrp & Return Item Div.) Group A Group B H. Drew A. Besses D. M i l l e r E. McMahon J . Earle R. Nalley 18. C o l l e c t i o n Dent. ( C i t y Coll. Div.) Group A Group B F.J. Drier S. Lerer H.R. Tappan W. Reckert F. P e t e r s o n A. Surman L. Vorback Weaver Proposed Eliminated Will he deposited witii Cash Custody Division Eliminated Will he deposited with Cash Custody Division Eliminated Will he deposited with Cash Custody D i v i s i o n Eliminated Will be deposited with Cash Custody D i v i s i o n Eliminated Will be deposited with Cash Custody Division Eliminated Will be deposited with Cash Custody Division Eliminated W i l l be deposited with Cash Custody D i v i s i o n -5- 8 5 0 INTERIOR COMPARTMENTS OF VAULTS (Cont'd) i > Membership Present 19. C o l l e c t i o n Dept.(Coup.Coll.Div.) Group A. Group B V. W i l l i s B. E. Wendell R. J . Stephens G. V. VanSicklen A. W, Cunningham W. H. Mall on Special Groups Lower d i a l interior conrpartoents SO. C o l l e c t i o n Dept. (Country C o l l . D i v , ) Group A. Groyp B A, H. Murdock . J . C . Carraway F.G* Adams A. I&gue W.R. Noe E.K, F o s t e r 2 1 . Disbursing Dept. (Expense Div.) Group A Group B V.C. McLaren E.G. Stocksr C.C. Hickey • P« B i c k s l e r M.S. Ross Cyril Boyce i X-2CDL2 a 22. Govt. Bond, Dept. (Bank Exchange Sec.) Group 4 „ Group B J . G . Hall L . J . Winters W.W. Burt D. Denny S.C. Msrwin C.A. J a g e l s H. Seer H. G r i f f i n 2 3 . Govt, Bond Dept.(Supply & P r e p . Sec.) Group A Group B H.W, Scott C.A. J a g e l s A. Martin C.A. Tfewkirk S.C. Merwin G. Wallace C. Cable W. Roberts 24# Govt. Bond Dept. (Conversion Sec.) Group A Group B G. McCormick C.A. J a g e l s R. Haring . F. P a r r e l 1 S.C. Merwin L« l a g e r R. Brown T. Mannion 2 5 . Govt. Bond Dept. (Coupon Paying D i v . ) Qroup A Group B J »B. Cunningham S.V. Ray William Wallace E. Wonsor / S.C. Iferwin C.A. J a g e l s W. B a r r i t t F . Touhass Proposed Eliminated Will be deposited with Cash Custody Division. Eliminated Will be deposited with C&sh Custody Division* Eliminated Will be deposited with Cash Custody Division Eliminated Will be deposited with Cash Custody Division Eliminated Will be deposited with Cash Custody Division Eliminated W i l l be deposited with Cash Custody Division Eliminated Will be deposited with Cash Custody Division X-2012 a 8 5 1 . -6- 4 <> , INTERIOR COMPARTMENTS OF VAULTS ( C o n t ' d , ) Membership Special Groups Lower dial interior Present 26. Govt. Bond D e r t . (Delivery Sec.) Group A Group B A. Hughes C.A. J a g e l s C. Thompson J . Kling S.C. Merwin H. Lewis J . Schaefer H* Foote Proposed Eliminated. Will "be deposited with Cash Custody D i v i s i o n . n.OTrypart'.rr 'R 27. Govt. Bond Dept,< (Exc<- Den on. S e c - ) Group A Group B W, E l l i o t t C.A. J a g e l s Edward McManus G. Kurtz S.C. Merwin W. Dis'brow C. Abele R. D i r i n g e r 28. Govt. Bond D e p t . ( I n d i v i d . E x c . S e c . ) Group A Group B G.E. Jamison R.M. Haviland C.H. Smiley D . J . Lewis S.C. Merwin C.A. J a g e l s A. Qaia J . Knox 29- Govt. Bond.Dept,(Reg.Exchange &Trans Sec.) Group A Group B J . Hynes C.A. J a g e l s W. Brush J . D . Smith S.C. Merwin L. F l t z p a t r i c k J , Dunn T . Walsh 30. Govt. Bond Dept. Group A F . Gascoigne H. Schauer S.C. Merwin (Sorting) Grow B C.A. J a g e l s H. Mackenzie G* McCann 31» Govt, Bond Dept. (War Savings Stamps) .Group.A Group B A.A. Nichols C.A. J a g e l s F. Savale L. S e i f e r t S.C. Merwin , C. Stanley J . Canfield Eliminated. Will be deposited with Cash Custody Division Eliminated Will he deposited with Cash Custody Division Eliminated Will he deposited with Cash Custddy D i v i s i o n , Eliminated Will -he deposited with Cash Custody D i v i s i o n , Eliminated Will be deposited with Cash Custody Division -7- Membership j Present Special Groups Lower d i a l interior X-2012 a Proposed 32. L i b e r t y Loan Assn. Department Group A Grout) B H»C. McGowan J . Traver F.C. Roche F. Dallimore M. Crosby S . Eddy Eliminated Will be deposited with Cash Custody D i v i s i o n . compartment s 33* Loan De-pt« (Loan & Disc. Div») Group A Group B C.N. Van Houten R.F» Cutler H.V. Stanley W. Coke l e t R«M. Morgan E . D. Snyder 3U. S e c u r i t i e s Department Group A U. Wells G. Stephenson L.W. Glover • 36. Service Dept. (Employment Division ) Group A Group B Joseph Famon R.R. Apgar H.B. Long E.C, Rink R.V. Brown G. Shannon 37. Service Dept. ( O f f i c e S e r . Fiv ..-Files) . f Eliminated Will be d e p o s i t e d with Cash Custody Division Eliminated W i l l . b e deposited with Cash Custody Division Eliminated ...... . 3 8 . Govt. Bond Dept.(incoming Mail Sec.) Group A Group B J . Hoffman I . Ross R. Gat1in J . Golden S . C . Merwin Will be deposited w i t h Cash Custody Division Will be deposited with Cash Custody D i v i s i o n . Single combination compartment W. G r i f f i t h s Will be deposited with Cash Custody Division Eliminated Grovrp B, K*B« Russell W. Valentine F.O Johnson 35* S e c u r i t i e s Dept. (Govt. Deposit Div.) Group J Group B J#5» Manchester, J r * W.H, Conover J . R . Cook E.D, Has sard H,C« Low, J r . , E. Vollweiler G«W, Snedeker J.M.B. McCubbin t Eliminated C»A* J age I s J . Baker Eliminated Will be deposited with Cash Custody Division
@FedFRASER